Ian McEwan, it was revealed, had taken the first "People's Booker", decided by public vote, with Atonement; but Carey was awarded the official gong in tonight's ceremony at London's Guildhall.

Kenneth Baker, chair of the judges, said True History of the Kelly Gang, based on Ned Kelly's letters and brilliantly sustained in a "direct, vigorous vernacular" without a single comma, had turned the outlaw and folk hero into "the Robin Hood of Australia".

All the shortlisted authors, Baker said, were writing at the peak of their powers. He commented that both True History and Atonement were better novels than those with which their authors had previously won the prize, McEwan's Amsterdam and Carey's Oscar and Lucinda.

He declared: "The judges chose Peter Carey's True History Of The Kelly Gang because it is a magnificent story of the early settler days in Australia, expressed through the unforgettable voice of a vilified man who came to stand for more than he knew."

Despite his past win, Carey said he was surprised at winning again. "I really thought I was beyond it, if I won it I would be fine, and if I didn't win it I would be fine. But I'm astonished to find I'm bursting with adrenaline and feeling like it never happened and here I am feeling like I've been run over by a truck. The truth is I'm delighted."

He said he was a good friend and admirer of Ian McEwan and they had exchanged emails to set a wager. "It was Ian who said whoever wins buys the other a splendid meal. I think it should be in New York because the restaurants there are suffering. We'll have good wine."

Australian-born Carey now lives in New York. Asked how he felt to be taking good news back there, he said: "It's trivial but in my life I'm excited and exhilarated."

Picking up his award, Carey said: "I thought I was so calm but you see now I have this and I realise how deeply in debt I am.

"I am really in debt to Ian McEwan who I now have to buy an extremely expensive meal for. I am really in debt to my youngest son Charlie, who came with us from New York and somehow persuaded me that if I won this prize, he should get $50 - and my other son, Sam, who decided to stay in New York will have to have $50 too."

The writer thanked his agent, publishers and editors over the years, and also his wife Alison, who persuaded him to write the winning book when he was "foolishly trying to write a novel about New York, which I love but know nothing about really".

He finished with a plea to guests at the dinner to not desert his home city. "We'd all like you to come visit us in New York because we really need you."

Carey admitted that the real Ned Kelly might not have recognised the character he created for his book. "I think Ned Kelly would say 'this is not me'. I made up a man's life and of course how could I possibly know what his life was like."

Asked what he'd spend the £21,000 prize money on, he replied that his sons went to private school in Manhattan, "so that'll be enough".